{¶1}
The district court upheld the decision of the Director of the
New Mexico Human Services Department, Medical Assistance
Division (HSD/MAD) to recoup Medicaid payments made to
Princeton Place (Princeton), a nursing home located in
Albuquerque, New Mexico. The claim was that Princeton was not
entitled to Medicaid payments for services provided to a
resident, J.F., because Princeton did not comply with New
Mexico Department of Health (DOH) nursing home preadmission
screening regulations before it admitted J.F. On appeal,
Princeton contends the administrative record demonstrates
that it complied with the applicable preadmission
regulations. We agree and reverse.

BACKGROUND

A.
The Federal and New Mexico Nursing Home Preadmission
Screening Statutory and Regulatory Framework

{¶2}
In 1987, Congress passed the Nursing Home Reform Act (NHRA).
See Pub. L. No. 100-203, §§ 4201-06, 101
Stat. 1330 (1987) (codified at 42 U.S.C. § 1396r
(2012)). The purpose of the NHRA "is to prevent the
placement of individuals with [mental illness] or [mental
retardation, e.g., intellectual disability][1] in a nursing
facility unless their medical needs clearly indicate that
they require the level of care provided by a nursing
facility." Medicare and Medicaid Programs; Preadmission
Screening and Annual Resident Review (PASARR), 57 Fed. Reg.
56, 450, 56, 451 (Nov. 30, 1992). To achieve this purpose,
the NHRA requires that each state receiving federal Medicaid
funding establish a program to screen all individuals seeking
admission to a nursing home for mental illness and
intellectual disability prior to admission. 42 U.S.C. §
1396a (a)(28){D)(I) (2012); 42 U.S.C. § 1396r(e)(7)
(A)-(B); 42 C.F.R. § 483.104 (2012); 42 C.F.R. §
483.106(a)(1) (2012). This screening is known as the
"PASARR" process. See 42 C.F.R. §
483.100 (2012). (3} Medicaid states are eligible to receive
Federal Financial Participation (FFP) at a rate of
seventy-five percent to reimburse nursing homes for services
provided to Medicaid-eligible individuals determined, in
accordance with the PASARR process, to need nursing home
care. See 42 U.S.C. § 1396b (2012); 42 C.F.R.
§ 483.122(a) (2012); 57 Fed. Reg. at 56, 451, 56, 481.
To qualify for Medicaid reimbursement, a nursing home is
required to enter into a Medicaid Provider Participation
Agreement (MPPA) with the state, under which the nursing home
agrees to follow all state and federal Medicaid statutes and
regulations, including PASARR requirements. (4} Pursuant to
the federal PASARR regulations, Medicaid states are required
to establish a two-level preadmission screening process for
nursing home applicants. See 42 C.F.R. §
483.128(a) (2012). At Level I, states "must identify all
individuals who are suspected of having" mental illness
or intellectual disability as defined by the federal
regulations. Id.; see 42 C.F.R. §
483.102(a)-(b) (2012) (defining mental illness and
intellectual disability for purposes of PASARR). States may
delegate the authority to conduct Level I screens to nursing
homes operating under an MPPA. See 57 Fed. Reg. at
56, 460. However, when individuals are identified as
suspected of having mental illness or intellectual disability
at Level I, they must be referred back to the states'
PASARR programs for Level II screening. See 42
C.F.R. § 483.106(e)(1)-(3). At Level II, states are
required to evaluate and determine whether nursing home
services or other specialized services are actually needed
for identified nursing home applicants. 42 C.F.R. §
483.128(a). The Level II evaluations and determinations are
thereafter provided to the applicants and admitting nursing
homes. 42 C.F.R. § 483.128(i)(1). And where nursing home
services are deemed appropriate for a particular applicant,
the admitting nursing home may admit the applicant. 42 C.F.R.
§ 483.116(a) (2012).

{¶5}In
New Mexico, the State's PASARR program is housed within
the DOH Developmental Disabilities Division. The State's
PASARR program is responsible for ensuring that preadmission
screening of all nursing home applicants is completed prior
to any applicant's admission to a nursing home. When all
PASARR requirements have been satisfied and an applicant has
been admitted to a nursing home, HSD/MAD is responsible for
processing the nursing home's claims for Medicaid
reimbursement. HSD/MAD is also responsible for seeking
recoupment of Medicaid funds that have been paid to nursing
homes when the PASARR requirements have not been satisfied.

{¶6}
In June 2011, J.F. underwent a Level I PASARR screening for
admission to Princeton, which at the time was operating under
an MPPA with the State of New Mexico. J.F. was born with
spina bifida, a congenital condition of the central nervous
system that affects the development of the spinal cord and
brain. At the time that he applied for admission to
Princeton, J.F.'s condition had deteriorated to the point
that he required assistance with his activities of daily
living including eating, toileting, bathing, dressing, and
ambulation.

{¶8}
Section A of the PASARR Form titled "Client Data"
asks for general personal information about a nursing home
applicant, including whether she or he has any physical or
mental diagnoses. Ms. Richer stated that under Section A,
J.F. suffered from spina bifida, dystonia, and urinary tract
infection.

{¶9}The
heading for Section D of the PASARR Form states that "IF
ANY ONE of the items to this section is 'Yes, ' the
person MUST BE REFERRED TO PASRR." Under Section D are
Questions 4 and 5. Question 4 asks "[i]s there any
indication of mental retardation?" Finding no indication
of mental retardation in J.F.'s medical records, Ms.
Richer checked "No" to question 4.

{¶10}Question
5 asks "[i]s there any indication of developmental
disability (a severe, chronic disability that manifested
before age 22)?" The instructions on the PASARR Form
addressing Question 5 state that "[a]ny severe, chronic
disability (except mental illness) that occurred before age
22 may indicate a developmental disability. Examples include:
cerebral palsy, spina bifida, quadriplegia before age 22, a
seizure disorder that started before age 22 or a severe head
injury that occurred before age 22." Concluding that
Question 5 was aimed at screening for developmental
disability "as it relates to mental retardation, "
and finding no indication in J.F.'s medical records of
this form of disability, Ms. Richer checked "No" to
Question 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(&para;11}
Ms. Richer additionally found no indication in J.F.' s
medical records of mental illness. Based on the lack of
indication of either mental illness or mental retardation in
his medical records, Ms. Richer did not refer J.F.'s
Level I screen to DOH for a Level II evaluation. J.F. was
admitted ...

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